We develop a life-cycle model of the labor market in which different worker-firm matches have different quality and the assignment of the right workers to the right firms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment...

study the efficiency of search equilibrium under decreasing returns to labor in production. Firms can sign long-term contracts with their workers which give them incentives to maximize the joint surplus associated with their relationship. When the firm hires a new worker, the terms of the...

Shimer (2005a) argues that the textbook equilibrium search model of unemployment explains less than 10% of the volatility in U.S. vacancies and unemployment when fluctuations are driven by productivity shocks. His paper as well as other recent work inspired by it are reviewed and extended here....

This paper studies the relationship between disembodied technological progress and unemployment in a standard search-matching model. We find that the sign of the correlation crucially depends on the degree of idiosyncratic uncertainty. The analysis uncovers a new effect whereby an increase in...

We study the effects of firing taxes on labor market outcomes. These taxes, more common in European markets, include all administrative and procedural costs incurred by the firm. As such, they are independent of the dismissed worker's skill level. We establish that, for young workers,...

New technology embodied in capital equipment can be adopted either through destruction of existing jobs and the creation of new ones or by renovation, updating the job's equipment. Under the assumption that the destruction of jobs generates worker layoffs, we show that higher productivity growth...

We present a competing-auction theory of the labor market, where job candidates auction their labor services to employers. An equilibrium matching function emerges which has many of the features commonly assumed, including constant returns to scale in large economies. The auction mechanism also...

This paper considers a matching model in which multiple steady-state unemployment rates exist if government expenditures and unemployment benefits are high enough. The focus on the extensive margin and a possible transition to a steady state with higher unemployment rates imply that the effect...

Shimer (2005) demonstrated that aggregate productivity shocks in a standard matching model cause fluctuations in key labor market statistics---such as the job-finding rate, the vacancy/unemployment ratio, and the unemployment rate---that are too small by an order of magnitude. This paper shows...

Two thirds of US unemployment volatility is due to fluctuations in workers' job finding rate. In search and matching models, aggregate productivity shocks generate such fluctuations: through firms recruiting effort, they affect the rate at which workers and firms come into contact....